Policy 102 – Tax “Simplification”

Policy 102

Tax “Simplification”

One Sentence Argument

Someone making $600,000 a year has virtually nothing in common with someone making $10 million, or $100 million a year – limiting the number of tax brackets doesn’t “simplify” the tax code, it just gives politicians another way to cut taxes for their millionaire donors.

Issue Breakdown

Conservative politicians like Paul Ryan love to talk about “simplifying” the tax code. They go on and on about how complicated the tax code is and how hard it is for normal people to pay their taxes, but for some reason their proposals for fixing that always come back to lowering the number of tax brackets.

Let’s be clear: changing the number of tax brackets would do nothing towards simplification of the tax code.

The complicated parts of the tax code, the things that families worry about or that force small businesses to spend precious amounts of their operating budget on accountants and tax lawyers to figure out, have nothing to do with brackets and everything to do with the vast array of loopholes that the donor class has worked hard to preserve.

By consolidating brackets in the name of simplification, conservatives are really arguing for tax cuts for the wealthy. Limiting the number of brackets, or getting rid of them entirely, would give the wealthy a sizeable tax cut and raise taxes on the middle-class at the same time. Doing the opposite, increasing the number of brackets (especially at the top), would ensure the ultra-wealthy end up paying more in taxes each year.

More Brackets, No Problem

Someone making $550,000 a year in New York City is in a wildly different financial position than someone making $100 million a year in Kansas, yet our tax code treats all income above $550,000 as essentially the same. The difference between those two is much larger than the difference between that New Yorker and a regular member of the middle-class, so why are they subject to the same tax rate?

A more progressive system could have dozens of additional brackets that ensure as an individual’s income continues to increase, that additional income is taxed at progressively higher rates. Income above $100 million could be taxed at a higher rate than income between $90 and $100 million, which is taxed higher than income between $80 and $90 million, and so on. This would raise significant amounts of money without materially adding to the complexity of the tax code.

We live in an era of calculators and computers – simple math doesn’t make things more complicated, unclear and ambiguous laws do. No one hires an accountant because they can’t figure out what tax bracket they’re in. Even in a world where the tax code had 500,000 brackets, it would still be as simple as inputting in your income into a website or spreadsheet and being told your bracket, no calculations required.

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